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TO:STATE AGENCIES ADMINISTERING CHILD SUPPORT ENFORCEMENT PLANS UNDER TITLE IV-D OF THE SOCIAL SECURITY ACT AND OTHER INTERESTED INDIVIDUALS

SUBJECT: Computerized Support Enforcement Systems

REGULATION REFERENCE: 45 CFR Parts 302, 303, 304, and 307

ATTACHMENT: Attached are final regulations which implement the computerized child support enforcement system provisions in section 405 of P. L. 96-265. These regulations make changes to interim final regulations issued on September 30, 1981 in response to comments received. This document reorganizes and redesignates most of the regulations as a new 45 CFR Part 307. In addition, there are changes to the regulations as part of a Department-wide effort to simplify and make consistent the regulations that govern the availability of Federal funding for automated data processing systems.

The provisions in these regulations concerning Federal funding at the 90 percent rate for costs of hardware are effective through September 30, 1984. Effective October 1, 1984, P. L. 98-378, the Child Support Amendments of 1984, changes section 455(a)(l)(B) of the Social Security Act to provide 90 percent Federal funding for the full cost of hardware components. Separate regulations will be issued to implement this new provision.

SUMMARY: Interim final rules published in the Federal Register on September 30, 1981 amended OCSE regulations at 45 CFR Parts 302, 303, and 304 to implement new computerized child support enforcement system (CSES) provisions in section 405 of Pub. L. 96-265. The amendments to Part 304 increased Federal financial participation (FFP) to 90 percent for the costs of developing and enhancing certain approved CSESs. They also specified when FFP is available at the 75 percent rate (now 70 percent rate) for CSESs. The amendments to Part 302 added a new State plan requirement which a CSES must meet in order to be eligible for Federal matching at the 90 percent rate. In addition, the regulations amended Part 303 as follows: they specified criteria OCSE must determine exist prior to approving an advance planning document (APD) for a system funded in 90 percent FFP; they specified that approved CSESs funded at the 90 percent rate must be reviewed and evaluated by OCSE on a continuous basis; and they specified the conditions under which OCSE would suspend approval of APDs for these systems. This document makes changes to those interim final rules in response to the comments received and reorganizes and redesignates most of the regulations as a new 45 CFR Part 307. OCSE has also made several changes to the regulations as part of a Department-wide effort to simplify and make consistent the regulations that govern the availability of FFP for automated data processing systems.

Please note that the provisions of these regulations concerning Federal funding at the 90 percent rate for costs of hardware are effective through September 30, 1984. Effective October 1, 1984, the Child Support Enforcement Amendments of 1984 change section 455(a)(1)(B) of the Act to provide 90 percent Federal funding for the full cost of hardware components of a child support enforcement system. Separate regulations will be issued to implement the new provision.

Section 405 of Pub. L. 96-265 amends title IV-D of the Social Security Act (the Act) regarding CSESs. First, the amendment adds paragraph 455(a)(3) to the Act which requires the Secretary to provide Federal funding at the 90 percent rate for costs attributable to the planning, design, development, installation or enhancement of an automatic data processing and information retrieval system that meets the requirements in paragraph 454(16), also added to the Act. The new paragraph 454(16) provides States with the option to amend their state plans to establish, in accordance with an APD approved under section 452(d) of the Act, a system that meets certain specified requirements. The new paragraph 452(d)(1) of the Act specifies criteria and requirements that an APD must satisfy in order for the Secretary to approve a CSES for Federal matching at 90 percent. The new paragraph 452(d)(2)(A) of the Act requires OCSE to review the development and operation of CSES s funded at 90 percent FFP to determine whether they conform to the approved APDs and the conditions for an approvable system specified in the paragraph 454(16) of the Act. The new paragraph 452(d)(2)(B) of the act requires the Secretary to suspend approval of any APD for a system funded at 90 percent if the Secretary determines that the CSES fails to comply substantially with the requirements in the APD. Finally, the new paragraph 452(e) of the Act requires the Secretary to provide any technical assistance considered necessary to assist the States in developing, implementing and providing security for CSESs funded at 90 percent. Section 405 has an effective date of July 1 1981.

Provisions of Interim Final Regulations

The interim final regulations published on September 30, 1981 contained the following provisions.

1. Computerized Child Support Enforcement Eligible for 90 Percent FFP

45 CFR 302.85, Computerized child support enforcement systems eligible for 90 percent FFP, (1) defines several technical terms used in the automated data processing field; (2) permits a State to elect in its State plan to provide for the establishment of a CSES that will assist State and local IV-D agencies in the administration of the approved State plan; and (3) requires a system funded at 90 percent FFP to be planned, designed, developed, installed or enhanced in accordance with an APD approved under § 303.65 and requires the system to control, account for, and monitor all the factors in the child support collection and paternity determination processes under the State plan.

45 CFR 303.05, Approval of advance planning documents for computerized child support enforcement systems eligible for 90 percent FFP, establishes requirements that an initial and updated APD must meet in order to be approved for Federal funding at 90 percent. The APD must specify how the objectives of the system will be met and represent the sole systems effort being undertaken by the State in accordance with 45 CFR 302.85.

Section 303.65 also requires the State to update the APD budget if it determines that a cost overrun is expected to exceed the total APD budget resulting in the need for additional Federal funding and/or if the Federal share of the total APD budget exceeds $100,000 and the overrun would result in a direct cost category overrun that is expected to exceed 5 percent of the total budget.

45 CFR 303.67, Suspension of approval of advance planning documents for computerized child support enforcement systems eligible for 90 percent FFP, provides that OCSE will suspend approval of an APD as of the date the system ceases to comply substantially with the approved APD specifications. If OCSE determines that a State has taken actions, as provided in the notice of suspension, that will qualify its systems effort for FFP at the 90 percent and/or 70 percent rate, as appropriate, Federal funding will resume.

5. FFP Rates for Computerized Child Support Enforcement Systems

45 CFR 304.90 Federal financial participation at the 90 percent rate for computerized child support enforcement systems, makes FFP available at the 90 percent rate in expenditures that OCSE determines are consistent with an APD approved under § 303.65 for CSESs that meet the requirements found in § 302.85. States are required by § 304.90 to obtain approval from OCSE for cost overrun expenditures by updating their APD budget and to obtain approval for costs not covered in an approved APD by amending their APD. As with all other costs eligible for Federal funding under the IV-D program, costs of developing a CSES can be matched only to the extent that a CSES is carrying out child or child and spousal support enforcement activities specified in a State's title IV-D State plan.

It should be noted that OCSE regulations at 45 CFR 304.24 cover conditions for FFP in costs of nonexpendable personal property. The Department published a final rule (47 FR 41575 on September 21, 1982) which revised § 304.24 to cross-reference new regulations at 45 CFR Part 95, Subpart G, on non-expendable personal property published in the same document. Prior to publication of the departmental regulations, § 304.24 only covered the capitalization and depreciation of property reimbursed at the 75 percent rate because that was the only rate at which expenditures were matched at the time this regulation was adopted. The new departmental regulations cover property reimbursed at both the 70 percent and 90 percent FFP rates under the Child Support Enforcement program.

Section 304.90 also establishes the consequences of suspension of an APD for a Statewide system funded at 90 percent FFP. It specifies that, in conjunction with suspending approval of an APD, OCSE shall disallow all FFP the CSES as of the date the State failed to comply substantially with the approved APD. Should OCSE determine that the State has taken the necessary actions as specified in the notice of termination, it will notify the State that FFP is again available. If a State does not wish to take the actions necessary to resume Federal funding at the 90 percent rate, it may apply for FFP at the 70 percent rate under the requirements of Part 95, Subpart F (see the discussion below).

Finally § 304.90 requires the State IV-D agency to submit annual updates to the APD for a system funded at 90 percent FFP at least 60 days before the beginning of the month that coincides with the month in which the initial APD was approved.

45 CFR 304.91 specifies that: (1) FFP is available at the 70 percent rate for the operation of CSESs that meet the requirements specified in § 302.85, if the APD approval requirements in § 303.65 are met; and (2) FFP is available at the 70 percent rate in expenditures for CSESs approved under 45 CFR Part 95, Subpart F. Under this section, 70 percent funding may be secured both retroactively and prospectively for a systems effort which failed to comply substantially with an APD which had been approved for 90 percent funding. Thus, the expenditures disallowed in regard to that effort may become eligible for 70 percent funding if the State applies for funding under the requirements of Part 95, Subpart F, and is granted approval from OCSE to secure this reduced funding. Future funding at the 70 percent rate for this same effort may also be granted by OCSE in the same fashion.

Reorganization and Redesignation of the Interim Final Rules

The Department of Health and Human Services (HHS) has decided to simplify and make consistent to the maximum extent possible under current law all HHS regulations that govern the availability of FFP for automated data processing systems.

As part of this effort, most of the interim final rules published in the Federal Register to implement section 405 of Pub. L. 96-265 are reorganized and redesignated in this document as 45 CFR Part 307. The interim final rules at § 302.85(b) are redesignated as a new § 302.85. In addition, we have amended 45 CFR 304.20 to cross-reference the funding provisions for computerized support enforcement systems in the new 45 CFR Part 307. We believe that these changes will make the regulations more understandable to those who use them.

Redesignation and Derivation Tables

For the convenience of readers, we have developed the following redesignation and derivation tables to indicate the relationship between the sections in the interim final rules and these final regulations.

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Old section New section

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302.85(a)...............................307.1.

302.85(b)...............................302.85.

302.85(c)...............................307.10.

303.65(a)...............................307.1.

303.65(b),(c) and (d)...................307.15(b),(c) and (d).

303.66(a)...............................307.1

303.66(b)...............................307.25.

303.67(a)...............................307.1.

303.67(b) and (c).......................307.40.

304.90(a)...............................307.1.

304.90(b)...............................307.30(a) and 304.20(c).

304.90(c),(d),(e) and (f).............. 307.30(b),(c),(d)and(e).

304.90(g).............................. 307.20.

304.91(a)...............................307.1.

304.91(b)...............................307.35 and 304.20(b)(9) and (10).

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New section Old section

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302.85..................................302.85(b).

304.20(b)(9) and (10)...................304.91(b).

304.20(c)...............................304.90(b).

307.0...................................New

307.1...................................302.85(a), 303.65(a),

303.66(a) 303.67(a),

304.90(a)and 304.91(a).

307.10..................................302.85(c).

307.15(a)...............................New.

307.15(b),(c)and(d).....................303.65(b),(c)and (d).

307.20..................................304.90 (g).

307.25..................................303.66 (b).

307.30..................................304.90 (b),(c),(d),(e)and

(f).

307.35..................................304.91 (b).

307.40..................................303.67 (b)and (c).

Changes Made To Interim Final Regulations

On December 23, 1982, final regulations with a comment period were published in the Federal Register (47 FR 57277) to implement section 2332 of Pub. L. 97-35, the Omnibus Budget Reconciliation Act of 1981, and section 171(a](1) of Pub. L. 97-248, the Tax Equity and Fiscal Responsibility Act of 1982. These final rules revised the interim final rules by:

-Removing the word "child" where it appeared in § 302.85; and

-Substituting the phrase "computerized support enforcement" for "computerized child support enforcement" wherever it appeared in

In response to the comments received on the interim final rules, we have made four changes to the regulations.

1. Section 307.l0(b)(13) was added to require a State's CSES developed or enhanced under § 302.85 to be compatible with the State's Medicaid system with respect to the transfer of the medical support information specified in 45 CFR Part 306.

2. Section 304.90(e), redesignated as § 307.30(d), is revised to specify that, if OCSE suspends approval of a State's APD and later reinstates its approval of the APD, the State cannot receive FFP at either the 70 or 90 percent rates for any costs incurred under the APD during the period of suspension. The disallowed expenditures may become eligible for 70 percent funding, however, if the State submits an APD under 45 CFR Part 95, Subpart F.

3. Section 304.90(g)(1), redesignated as § 307.20(a), is revised to specify that States must submit their APDs in accordance with the submission process prescribed in 45 CFR Part 95, Subpart F.

4. Section 304.91(b)(1), redesignated as § 307.35(a), is revised to clarify that the requirements of § 307.10 must be met in order to obtain 70 percent FFP in expenditures for the operation of systems approved under § 307.15.

We have also made several changes to the regulations as part of our effort to simplify and make consistent all HHS regulations that govern the availability of FFP for automated data processing systems.

1. The new 45 CFR Part 307, Computerized Support Enforcement Systems, includes an introductory regulation at § 307.0 that summarizes the content of Part 307.

2. The definitions of the terms "Design," "Development" and "Installation" are clarified in § 302.85(a), redesignated as

§ 307.1, to specify that each term includes hardware to the extent necessary for the CSES phase being defined. This is consistent with current OCSE policy.

3. Section 307.15(a) more clearly prescribes the requirements for OCSE approval of an APD for a CSES as reflected in the language of section 452(d)(1) of the Act. The interim final rules at

§ 302.85 were unclear on these requirements.

We have also revised § 303.65(d)(2), redesignated as

§ 307.15(d)(2), to clarify the conditions under which States must update the APD budget.

Waiver of Proposed Rulemaking

The Administrative Procedure Act, 5 U.S.C 553(b)(B), provides that, if the Department for good cause finds that a notice of proposed rulemaking is unnecessary, Impracticable, or contrary to the public interest, it may dispense with such notice. The Department finds that there is good cause to dispense with proposed rulemaking with respect to the reorganization and redesignation of the interim final rules and related changes because they are not substantive or policy significant, and accordingly, a notice of proposed rulemaking is unnecessary.

Discussion of Comments

Comments on the interim final rules were received from six States and one individual. While the commenters generally supported the interim final regulations, several changes were recommended. A summary of the substantive comments and our response follows.

1. Comment: One State asked whether the regulations permit the States to meet the requirements in § 302.85(c) (redesignated here as § 307.10) via combined automated/manual systems when it would be cost beneficial to develop and use such systems.

Response: § 302.85 requires CSESs funded at 90 percent FFP to meet all of the functional requirements prescribed in the redesignated § 307.10(b). Under paragraph (b), each CSES must control, account for, and monitor all the factors in the support collection and paternity determination process under the State plan. The States may comply with § 302.85 via combined automated/manual systems that meet all of the function requirements prescribed in § 307.10(b). However, OCSE will only approve a combined automated/manual system for 90 percent FFP if the proposed system is the most efficient and effective way to carry out the functional requirements referred to above. We envision any one of the six types of automated system design alternative described below in the response to question 5 to be approvable for 90 percent FFP in a State. These alternatives can be used in various combinations within a State. (Also see response to question 6 below.)

2. Comment: One State commented that the provision in the regulations that requires the CSES to interface with the State's automated AFDC system will result in considerable modification-related costs to State which have, or are in the process of developing, automated AFDC systems.

Response: Section 454(16)(B) of the Act and the implementing regulations at the redesignated 45 CFR 307.10(b)(10) require each CSES to interface with the records of the State's AFDC program to determine whether a support collection causes a change in eligibility for, or the amount of, aid under the AFDC program. Thus, a CSES is required to interface with the State's automated AFDC system when State AFDC records are maintained as part of the system. The provision at the redesignated 45 CFR 307.10(b)(9) that the CSES accept case referrals and update information from the State's AFDC program does not require that the CSES interface with the State's automated AFDC system. Thus, the State has some flexibility and discretion in determining how it will meet these requirements.

3. Comment: One State commented that, because HHS is encouraging interface between State CSESs and State medical assistance program systems, the final regulations should address the issue of compatibility between the two systems.

Response: Section 454(16) of the Act prescribes the requirements that a CSES must meet to qualify for 90 percent FFP. Although the statute does not require CSESs developed or enhanced with 90 percent FFP to be compatible with State Medicaid mechanized claims processing and information retrieval systems, in response to the above comment, we are requiring States to ensure that new or enhanced systems are compatible with the State Medicaid system in order to provide for the most cost-effective and efficient means of transferring medical support information to State Medicaid agencies under 45 CFR Part 306.

4. Comment: One State commented that the definition of the term "Computerized Child Support Enforcement System" should be revised to indicate that the reference to "child support" in the definition includes "medical support" when the State IV-D agency has elected in its State plan to secure and enforce medical support obligations on behalf of the State Medicaid agency.

Response: Section 454(16) of the Act requires each new or enhanced CSES to control, account for, or monitor any of the factors related to securing and enforcing medical support obligations when the State IV-D agency has elected in its State plan to do so under cooperative agreement with the State Medicaid agency. Nonetheless, the IV-D agency may include these items as part of a CSES development or enhancement effort. Funding is available for CSES developmental, enhancement and operational costs incurred in connection with medical support enforcement activities performed under the agreement (see 45 CFR 306.30 and 42 CFR 433.152(b)(2).

Approval of an APD for a Statewide CSES (45 CFR 303.65, Redesignated Here as 45 CFR 307.1 and 307.15)

5. Comment: One State commented that the discussion in the preamble to the interim final rules regarding two of the six system design alternatives we envision to be approvable for 90 percent FFP conflicts with § 303.65(b)(1) (redesignated here as § 307.15(b)(1)) which states in part that "the APD must represent the sole system effort being undertaken by the State."

Response: We agree that the fourth and sixth system design alternatives presented in the interim final rules as approvable for 90 percent FFP do not represent a single State systems effort. Therefore, we have revised the acceptable design alternatives as follows: (1) State management system with local components performing major functions; (2) comprehensive State system with little or no local automated functioning other than data transmission; (3) comprehensive local system meeting all functional requirements and developed under the State APD as a component of a State system; (4) State management system with local feeder system performing limited functions; (5) improvement of an existing State system; and (6) improvement of an existing local system as part of a State management system.

6. Comment: One State suggested that the interim final rules at 45 CFR 303.65(b)(2) (redesignated here as § 307.15(b)(2)) be revised to indicate that the State would not have to install an automated CSES in counties with small IV-D caseloads.

Response: The regulations at the redesignated 45 CFR 307.15(b)(2) do not require the States to install the CSES in counties with small caseloads. Instead, § 307.15(b)(2) requires the APD to specify how the objectives of the CSES prescribed in

§ 307.15 will be carried out throughout the State. We believe that a State could use any one of six basic CSES design alternatives and meet the requirements prescribed in § 307.15(b)(2). The State can use these alternatives in various combinations within the State. For example, a State determines that the most efficient and effective way to carry out the functional requirements prescribed in § 307.15 throughout the State is to develop a State management system with local feeder systems in all but three counties within the State. The feeder systems would perform limited functions and transmit all necessary information to the State management system. The three remaining counties, all with small IV-D caseloads, would manually maintain the information necessary to meet the functional requirements prescribed in § 307.15. Such counties would provide all necessary information to the State via hard copy for input into the State management system. The State system will use the information received from all counties within the State to meet the CSES functional requirements.

Response: We believe that the references to 70 percent FFP in the redesignated § 307.15 are appropriate because the APD must address all costs of the proposed system, including the expenditures for the operation of the CSES which are reimbursable at the 70 percent rate (see § 307.35). The title of § 307.15 does not indicate that all expenditures for the CSES established under an approved APD are eligible for 90 percent Federal funding. Rather, the title distinguishes that the regulation deals with the approval of APDs for systems that are eligible for 90 percent FFP (except for operating costs), as opposed to the regulations at 45 CFR Part 95, Subpart F, dealing with systems funded strictly at the 70 percent rate.

8. Comment: One State questioned the appropriateness and feasibility of requiring the use of the Model CSES or its functional equivalent as a condition for 90 percent Federal funding.

Response: The regulations do not require the States to use the Model CSES or its functional equivalent as a condition for 90 percent FFP. Rather, the regulations at § 307.15(b)(11) require the States to describe each alternative system considered including the Model CSES, any State system identified by OCSE for consideration and any State system already in place in the State that might be enhanced to meet the requirements for 90 percent FFP. We believe this requirement is necessary to ensure that the State considers all feasible alternatives. The regulations require the States to consider the Model CSES because we believe that it is a technically sound, comprehensive, cost efficient system that is adaptable to environments in many States. However, we recognize the fact that the Model CSES may at times not be the best alternative available.

9. Comment: One State objected to the provision in the interim final rules that requires proposed State systems to be compared with the OCSE Model system on a cost alone basis because the Model system has only been satisfactorily transferred to one State.

Response: We believe that the Model CSES is a technically sound, comprehensive and cost efficient system that with some modification is readily transferable to the environment in many States. The interim final rules under the heading "Approval of Advance Planning Documents for CSESs Funded at 90 Percent FFP" indicate that costs play a major role in the comparison of a proposed system to the Model. However, OCSE also compares each proposed State system to the Model using factors such as the capability to carry out the functional requirements prescribed in § 307.10, anticipated life span and comparability with State/local environment. In comparing a proposed State system to the Model CSES, we also take into consideration the estimated cost of modifying the Model to meet a State's particular needs. Although cost is a significant factor, OCSE will consider, as part of the APD review and approval process, all relevant factors before making a decision regarding a State's proposed system.

10. Comment: One State commented that the interim final rules at 45 CFR § 303.65(b)(13) (redesignated here as § 307.15(b)(13)) should not require the APD to include the methodology for determining operational costs because that is approved by the Regional Administrative Support Center, Division of Cost Allocation.

Response: § 307.15(b)(13) requires the APD to specify the basis for all direct and indirect costs of the proposed CSES because we want to ensure that costs associated with the CSES can be derived and apportioned appropriately. In addition, information regarding the basis of such costs is helpful in determining the validity of the proposed CSES budget. As the commenter indicated, however, the approval of an APD for a Statewide CSES does not constitute approval of the basis for determining direct and indirect costs for the development and operation of the proposed CSES. To comply with the new requirement at 45 CFR 95.509(a), a State that receives approval to develop a CSES must promptly submit for approval, as part of its amended cost allocation plan, the basis for determining direct and indirect costs of the development and operation of the system, including the methodology for determining costs of planning, design, development, installation, enhancement and operation to the Director, Division of Cost Allocation, in the appropriate HHS Regional Office. If the State does not submit an amended cost allocation plan as required by

§ 95.509, all CSES related costs would be disallowed in accordance with 45 CFR 95.519.

11. Comment: Two State objected to the provision in the interim final rules that requires the State to update annually their APDs for CSESs funded at 90 percent FFP in order to be eligible for continued Federal funding because it will place a heavy work burden and funding uncertainty on the States.

Response: The States must annually update their APDs for CSESs funded at 90 percent FFP because section 454(16) of the Act requires the States that have decided to develop CSESs with 90 percent Federal funding to establish such systems in accordance with an initial and annually updated APD. The regulations at

§ 303.65, redesignated as § 307.15, specify the requirements that an initial and annually updated APD must meet. Although the initial APD must meet all of the requirements prescribed in

§ 307.15(b), the annual APD update must meet only those requirements of paragraph (b) of the regulation prescribed in instructions issued by OCSE. In October 1981, OCSE issued a CSES guidance document entitled "Program Procedures Guide for 90 Percent Federal Financial Participation" which lists on pages II-13 and II-14 the requirements in § 307.15(b) that an annually updated APD must meet. We believe that these minimum APD update requirements are necessary to ensure that the States are developing systems consistent with approved APDs.

12. Comment: One State expressed concern regarding the requirement in the interim final rules at 45 CFR 304.90(c) (redesignated here as § 307.30(b)) which limits the availability of FFP at the 90 percent rate in expenditures for the rental or purchase of hardware or proprietary software. The commenter suggested that this is inconsistent with the availability of 90 percent Federal funding for equipment in other programs and requires the States to develop mechanisms to identify costs eligible for 90 percent Federal funding versus costs eligible for 70 percent Federal funding.

Response: Congress, in Senate Report No. 98-408, page 68, indicated that FFP in the cost of operating all CSESs is to remain at the 75 (now 70) percent rate. In addition, section 455(a)(3) of the Act limits the availability of FFP at the 90 percent rate to expenditures for the planning, design, development, installation or enhancement of approved CSESs that meet the requirements of the law. We believe that 70 percent Federal funding for expenditures in the rental or purchase of hardware and proprietary software is consistent with the intent of Congress and the provisions of the Act, because these items are part of the operating costs of the system. If a State needs help in developing a mechanism for identifying hardware and proprietary software eligible for 90 percent FFP versus 70 percent FFP, the State IV-D agency should request technical assistance from the Director, Division of Cost Allocation, in the appropriate Regional Office.

13. Comment: One State asked about the availability of Federal funding during the period that an APD is suspended.

Response: FFP is not available at either the 90 or 70 percent rate for the costs of systems efforts that are not consistent with an approved APD. Thus, FFP is not available in system expenditures incurred during the period of APD suspension except as provided in § 307.35(b). Since the interim final rules do not adequately address the availability of FFP for expenditures incurred during the period of APD suspension, we have specified in § 307.30(d) that FFP is not available at either the 90 or 70 percent rates in expenditures incurred after the date of APD suspension until OCSE determines that the State has taken the actions specified in the notice of suspension described in § 307.40(a)(2). Thus, if OCSE suspends approval of a State's APD and later reinstates its approval, the State cannot receive FFP for any costs incurred during the period of suspension. Under § 307.35(b), however, if OCSE suspends approval of an APD for 90 percent Federal funding, the State may apply for FFP at the 70 percent rate under 45 CFR Part 95, Subpart F and the expenditures disallowed with the regard to the APD for 90 percent funding may become eligible for 70 percent funding on a retroactive basis.

14. Comment: One commenter suggested that, because the preamble to the interim final rules indicates that information States must submit in their APDs falls within the general scope of 45 CFR Part 95, Subpart F, and the content and process for submission of APDs specified in such regulations have been approved by the Office of Management and Budget (OMB) under control number 0990-0058, the interim final rules should have indicated that the APD must be submitted in accordance with the submissions process prescribed in 45 CFR Part 95, Subpart F.

Response: We agree that the interim final rules should have specified that APDs must be submitted in accordance with the submission process prescribed in 45 CFR Part 95, Subpart F. Therefore, we have specified in the final regulations at 45 CFR 307.20(a) that States must submit their APDs in accordance with the submission process contained in 45 CFR Part 95, Subpart F.

15. Comment: One State commented that the interim final rules at § 304.91(b)(1) (redesignated here as § 307.35(a)) should be expanded to include more definitive guidelines.

Response: We agree that the provision regarding the availability of FFP at the 70 percent rate in expenditures for the operation of systems was not clear. Rather than repeating the system requirements listed in § 307.10, we have revised 45 CFR 307.35(a) to clarify by cross-reference that the requirements of § 307.10 must be met in order to obtain 70 percent FFP in expenditures for the operation of systems approved under § 307.15.

OMB Review

45 CFR 307.10(b) (1), (3), [4), (7) and (8) and 307.15 (b) and (c) contain information collection requirements. These requirements have been reviewed and approved by OMB. The OMB approval numbers are 0960-0343 and 0960-0344.

List of Subjects

45 CFR Parts 302, 303 and 304

Child welfare, Grant programs/social programs.

45 CFR Part 307

Child welfare, Grant programs/social programs, Computer technology.

Regulatory Impact Analysis

Total projected system cost at 90 percent Federal funding for FY 1983-1985 are $41.57 million. The total projected increase in Federal personnel costs for the same period is $893,800 for implementing the review requirements of the statute. We believe most of the system costs would he incurred even if Federal funding remained at 70 percent. Second, State and Federal government savings resulting from the activity are expected to far exceed total projected system costs. Finally, the system costs identified above are in large part the direct result of statutory change, rather than the provisions of the rules themselves. For these reasons, the Secretary has determined that this final rule is not a "major rule" under Executive Order 12291. Further, because the provisions of these rules primarily affect States, the Secretary certifies that these regulations will not have a significant economic impact on a substantial number of small entities, and do not require a regulatory flexibility analysis under the Regulatory Flexibility Act of 1980.

The interim final rules published at 46 FR 47788 on September 30, 1981, are adopted as final rules with the following changes:

1. 45 CFR 302.85(a) and (c), 303.65, 303.66, 303.67, 304.90 and 304.91 are revised and redesignated as a new 45 CFR Part 307 which reads as follows:

Authority: (Sec.1102 of the Social Security Act (42 U.S.C. 1302) and sec. 452(d) and (e), 454(16) and 455(a) of the Social Security Act (42 U.S.C. 652 (d) and (e), 654(16) and 655(a))

§307.0 Scope of this part.

This part implements sections 452(d) and (e), 454(16) and 455(a) of the Act which prescribe:

(a) The requirements that a computerized support enforcement system must meet in order to be eligible for Federal financial participation (FFP) at the 90 percent rate;

(b) The criteria the Office must determine exist prior to approving an advance planning document (APD) for a system funded at 90 percent FFP;

(c) The requirements and procedures for the submittal of an APD;

(d) The requirement for a continuous review of each approved computerized support enforcement system funded at the 90 percent rate;

(e) The availability of FFP at the 90 percent rate for the costs of developing, implementing and enhancing a computerized support enforcement system;

(f) The availability of FFP at the 70 percent rate for systems activities; and

(g) The conditions under which the Office will suspend approval of an APD for systems funded at 90 percent rate.

§307.1 Definitions.

"Advance planning document" or "APD"--The definition of this term found in § 95.605 of this title also applies to this section. (See § 307.15 of this part for specific requirements that APDs must meet for appropriate system costs to be funded at 90 percent FFP.)

"Computerized support enforcement system" means a system of software and hardware (that may have State and local components) which:

(1) Introduces, processes, accounts for and monitors data used by the Child Support Enforcement program in carrying out activities under the State plan; and

(2) Produces utilization and management information about support enforcement services as required by the State IV-D agency and Federal government for program administration and audit purposes.

"Design" or "system design" means a combination of narrative and diagrams describing the structure of the computerized support enforcement system. This includes the use of hardware to the extent necessary for the design phase.

"Development" means the detailing of system and program specifications, programming, and testing. This includes the use of hardware to the extent necessary for the development phase.

"Enhancement" means modifying or adding to an existing computerized support enforcement system.

"Installation" means the integrated testing of programs and subsystems, system conversion, and turnover to operational status, including pilot testing and data validation. This includes the use of hardware to the extent necessary for the installation phase.

"Operation" means the automated processing of (1) data associated with the provision of support enforcement services and collections (including the distribution and payment of incentives) and (2) reports on a continuous basis. Operation includes the use of supplies, software, hardware and personnel directly involved in the daily functioning of computerized support enforcement systems.

"Planning" means:

(1) The preliminary project activity to determine the requirements necessitating the project, the activities to be undertaken, and the resources required to complete the project;

(2) The preparation of an APD;

(3) The preparation of a detailed project plan describing when and how the computer system will be designed and developed; and

(4) The preparation of a detailed implementation plan describing specific training, testing, and conversion plans to install the computer system.

"Requirements analysis" means determining and documenting the information needs and the functional and technical requirements the proposed computerized system must meet.

"Software"-The definition of this term found in § 95.605 of this title is also applicable to this part.

The definitions found in § 301.1 of this chapter are also applicable to this part.

§307.10 Computerized support enforcement systems.

At a minimum, each State's computerized support enforcement system established under the title IV-D State plan at § 302.85 of this chapter must:

(a) Be planned, designed, developed, installed or enhanced in accordance with an initial and annually updated APD approved under § 307.15 of this part; and

(b) Control, account for, and monitor all the factors in the support collection and paternity determination processes under the State plan. At a minimum this must include:

(1) Maintaining identifying information such as social security numbers, names, dates of birth, home addresses and mailing addresses (including postal zip codes) on individuals against whom support obligations are sought to be established or enforced and on individuals to whom support obligations are owed, and other data as required by the Office, and assuring compatibility with the systems of different jurisdictions to permit periodic screening to determine whether an individual is paying or is obligated to pay support in more than one jurisdiction;

(2) Periodically verifying the information on individuals referred to in paragraph (b)(1) with Federal, State and local agencies, both intrastate and interstate;

(3) Maintaining data necessary to meet Federal reporting requirements on a timely basis as prescribed by the Office;

(4) Maintaining information pertaining to:

(i) Delinquency and enforcement activities;

(ii) Intrastate, interstate and Federal location of absent parents;

(iii) The establishment of paternity; and

(iv) The establishment of support obligations;

(5) Collecting and distributing both intrastate and interstate support payments;

(a) Approval of an APD. The Office shall not approve the initial and annually updated APD unless the document, when implemented, will carry out the requirements of § 307.10 of this part and the conditions for APD approval specified in this section.

(b) Conditions for initial approval. In order to be approvable, an initial APD for a computerized support enforcement for a computerized support enforcement system described under

§ 307.10 must meet the following requirements:

(1) The APD must represent the sole systems effort being undertaken by the State in accordance with § 307.10;

(2) The APD must specify how the objectives of the computerized support enforcement system in § 307.10 will be carried out throughout the State; this includes a projection of how the proposed system will meet the functional requirements of § 307.10 and how the system will encompass all political subdivisions in the State within a reasonable period of time.

(3) The APD must assure the feasibility of the proposed effort and provide for the conduct of a requirements analysis study which addresses all system components within the State and includes consideration of the program mission, functions, organization, services, constraints, and current support related to the computerized support enforcement system;

(4) The APD must indicate how the results of the requirements analysis study will be incorporated into the proposed system design, development, installation or enhancement;

(5) The APD must contain a description of each component within the proposed computerized support enforcement system as required by § 307.10 and must describe information flows, input data, and output reports and uses;

(6) The APD must describe the security requirements to be employed in the proposed computerized support enforcement system:

(7) The APD must describe the intrastate and interstate interfaces set forth in § 307.10 to be employed in the proposed computerized support enforcement system;

(8) The APO must describe the projected resource requirements for staff, hardware, and other needs and the resources available or expected to be available to meet the requirements;

(9) The APD must contain a proposed budget including a description of estimated expenditures by category and amount for:

(i) Items that are eligible for Federal funding at the 90 percent rate; and

(ii) Items related to operating the system that are eligible for Federal funding at the 70 percent rate;

(10) The APD must contain an implementation plan and backup procedures to handle possible failures in system planning, design, development, installation or enhancement;

(11) The APD must describe each alternative system considered including the advantages of the proposed system over the alternatives; if a Model system or a State system that the Office has identified for consideration by State IV-D agencies in not proposed, these systems must be among the alternatives considered; if a system that is already in place in the State could be enhanced to meet the requirements for 90 percent FFP, that system must be among the alternatives considered;

(12) The APD must contain a cost benefit analysis of the proposed computerized support enforcement system that describes the proposed improvements to the IV-D program in both qualitative and quantitative terms;

(13) The APD must specify the basis for determining direct and indirect costs of the computerized support enforcement system during development and operation, including the methodology for determining costs of planning, design, development, installation or enhancement that are eligible for 90 percent Federal funding versus costs of operations that are eligible for 70 percent Federal funding; and

(14) The APD must contain a statement indicating the period of time the State expects to use the proposed computerized support enforcement system.

(c) Conditions for approval of annual update. The APD for a computerized support enforcement system described under § 307.10 must be updated annually. In order to be approvable, the annual update of an APD for a computerized support enforcement system described under § 307.10 must meet only those requirements of paragraph (b) of this section that are prescribed by instructions issued by the Office.

(d) Periodic update of APD budget. The budget required under paragraph (b)(9) of this section must be updated any time a cost overrun is anticipated if as a result of the cost overrun:

(1) The total APD budget will be exceeded, resulting in the need for additional Federal funding; or

(2) The Federal share of the total APD budget exceeds $100,000 and the increase of a direct cost category is expected to exceed 5 percent of the total budget. (See § 307.30(e) of this part on treatment of cost overruns.)

(Approved by the Office of Management and Budget under control number 0960-0343)

(a) Submit an APD for a computerized support enforcement system, approved and signed by the State IV-D Director and the appropriate State official, in accordance with the submission process prescribed in 45 CFR Part 95, Subpart F;

(b) Submit annual updates of the APD at least 60 days before the beginning of the month that coincides with the month in which the initial APD was approved; and

(c) Obtain approval from the Office before incurring costs for activities not covered under an approved APD by amending the APD.

The Office will on a continuous basis review, assess and inspect the planning, design, development, installation, enhancement and operation of computerized support enforcement systems developed under § 307.10 of this part to determine the extent to which such systems:

a) Conditions that must be met for FFP. Federal financial participation is available at the 90 percent rate in expenditures for the planning, design, development, installation or enhancement of a computerized support enforcement system as described in

§ 307.10 of this part if:

(1) The Office has approved an APD in accordance with

§ 307.15 of this part;

(2) The Office determines that the system meets the requirements specified in § 307.10;

(3) The Office determines that the expenditures incurred are consistent with the approved APD;

(4) The Office determines that the computerized support enforcement system is designed effectively and efficiently and will improve the management and administration of the State IV-D plan;

(5) The State IV-D agency agrees in writing to use the system for a period of time which is consistent with the APD approved by the Office, or for any shorter period of time which the Office determines is sufficient to justify the Federal funds invested; and

(6) The State or local government has ownership rights In software, software modifications and associated documentation that is designed, developed, installed, or enhanced with 90 percent FFP under this section subject to the Department of Health and Human Services license specified in paragraph (c) of this section.

(b) Limitation on reimbursement of hardware and proprietary software. FFP at the 90 percent rate is not available in expenditures for the rental or purchase of hardware or proprietary software except to the limited extent that the hardware or proprietary software is used for the planning, design, development, installation or enhancement of a computerized support enforcement system as described in § 307.10. (See § 307.35 of this part regarding reimbursement at the 70 percent rate.)

(c) HHS rights to software. The Department of Health and Human Services reserves a royalty-free, non-exclusive and irrevocable license to reproduce, publish or otherwise use, and to authorize others to use for Federal government purposes, software, software modifications, and documentation developed under § 307.10. This license would permit the Department to authorize the use of software, software modifications and documentation developed under § 307.10 in another project or activity funded by the Federal government. (Also see 45 CFR 95.617.)

(d) Consequences of suspension of the APD. If the Office suspends approval of an APD in accordance with § 307.40 of this part during the planning design, development, installation, or operation of the system:

(1) The Office shall disallow FFP as of the date the State failed to comply substantially with the approved APD; and

(2) FFP at the 90 and 70 percent rates is not available in any expenditures incurred under the APD after the date of the suspension until the date the Office determines that the State has taken the actions specified in the notice of suspension described in § 307.40(a)(2). The Office will notify the State in writing upon making such a determination. (See § 307.35(b) regarding reimbursement for disallowed expenditures under Part 95, Subpart F of this title.)

(e) Treatment of cost overruns. FFP Is available in cost overrun expenditures described in § 307.15(d) only if the expenditures are approved by the Office. (See § 307.15 for procedures for initiating the approval process.)

Federal financial participation at the 70 percent rate is available only in computerized support enforcement system expenditures for:

(a) The operation of systems that meet the requirements specified in § 307.10 of this part if the conditions for APD approval in § 307.15 of this part are met; and

(b) Systems approved in accordance with Part 95, Subpart F of this title. This may include expenditures for a system which were disallowed by the Office because the system failed to comply substantially with an APD approved under § 307.15.

(a) Suspension of approval. (1) The Office will suspend approval of the APD for a computerized support enforcement system approved and developed under § 307.10 of this part as of the date that the system ceases to comply substantially with the criteria, requirements, and other provisions in the APD. Federal funding will be disallowed as described in § 307.30(d) of this part.

(2) The Office will immediately notify the State in writing of the decision to suspend approval of the APD. The notice will give the reasons for and effective date of the suspension and specify the actions required for the State to receive Federal funding in the future for its systems activities.

(b) Duration of suspension. The suspension of approval of an APD under paragraph (a) shall remain in effect until the Office determines that actions required for Federal funding in the future, as specified in the notice of suspension, have been taken and the Office so notifies the State.

2. The table of contents to 45 CFR Parts 303 and 304 are amended to read as follows:

PART 303--[AMENDED]

a. The table of contents to 45 CFR Part 303 is amended by removing the following titles:

(c) Federal financial participation is available at the 90 percent rate for the planning design, development, installation and enhancement of computerized support enforcement systems that meet the requirements in § 3O7.30(a) of this chapter.

(Sec. 1102 of the Social Security Act (42 U.S.C. 1302) and Sections 452 (d) and (e), 454(16) and 455(a) of the Social Security Act (42 U.S.C. 652 (d) and (e), 654(16) and 655(a))